Fraud of the Month – Feb. 2021

Pain Cream King Dethroned

BY ARINZE IFEKAUCHE | February 11, 2021

Wade Ashley Walters, a 54 year-old businessman from Hattiesburg, Mississippi has etched his place in state history. In mid-January he was sentenced to nearly 20 years in prison and an eye popping $344M in restitution and forfeitures for running the biggest healthcare fraud scheme Mississippi has ever seen.

Walters constructed a network of compounding pharmacies and pharmaceutical distributors to support his fraudulent enterprise that stretched across the country. In just four years Walters and his two-dozen co-conspirators soaked TRICARE and other health insurance plans for more than $287M from 2012 to 2016. The racket was focused on pushing specific pain cream formulas through Walters’ pharmacy network. 

Most of the pain creams cost between $11,000 and $14,000 per prescription. Walters’ criminal enterprise was in the business of mass production. Walters knew which combinations were most expensive and he went out of his way to ensure that the prescriptions he processed contained ingredients that were optimized for profit –– rather than effectiveness. Walters even went so far as to distribute prescription pads with preprinted formulas on them to participating physicians and recruiters so that he wouldn’t miss a penny of ill-gotten gains. He also refilled his patients’ prescriptions, even the ones that had never been seen by a doctor, automatically. This exponentially increased his profits.

It was these activities, as well as his repeated efforts to launder his proceeds through transactions in excess of $10,000 that ultimately caught the attention of the DOJ’s Health Care Fraud Strike Force and the FBI’s Field Office in Jackson, Mississippi. In January of 2016 the feds executed coordinated raids at multiple businesses across the state believed to be involved in the fraud ring. Their investigation uncovered the inner workings of Walters’ criminal enterprise. In addition to modifying prescription formulas to maximize profits, Walters also paid recruiters to find veterans that could procure high-dollar compound meds. He also involved the friends and family of employees that worked for his co-conspirators as patients.

According to prosecutors, Walters paid the recruiters commissions based on the percentage of the reimbursements paid by pharmacy benefit managers and healthcare benefit programs, including commissions on claims reimbursed by TRICARE. And it wasn’t just the recruiters on the dole. Walters also targeted practitioners –– sometimes offering them kickbacks to knowingly prescribe the high dollar compound medications or sign off on prescriptions for patients they never examined. To cover his tracks, Walters manipulated copayment systems to make it seem as if the fraudulent pharmacies were collecting copayments from legitimate patients. 

The conspiracy was a sprawling multi-state operation. An additional $110M has been attributed to Walters and at least 32 others in Mississippi, Louisiana and Florida. More than a dozen have been convicted or pled guilty. Walters is also linked to a case in California in which one of his businesses in Utah pleaded guilty to conspiracy to defraud the U.S. government. The terms of the plea agreement include a $25,000 fine and restitution of $621,978. Authorities expect the investigation into the Mississippi case to continue for months –– if not years ––  as they dig deeper into the largest and most wide-ranging fraud scheme the Magnolia State has ever witnessed.

About the author: Arinze Ifekauche is the Communications Director of the Coalition Against Insurance Fraud. He can be reached at arinze@insurancefraud.org.